PES Holdings: Refinery Explosion, Hilco Sale, and $200M Insurance Recovery

PES Holdings, LLC and seven affiliated debtors filed for chapter 11 in the U.S. Bankruptcy Court for the District of Delaware on July 21, 2019, lead case number 19-11626, one month after an explosion at the Girard Point refinery's alkylation unit rendered the largest oil refining complex on the U.S. East Coast inoperable. The filing was the company's second chapter 11 in 14 months, following an emergence from a prior reorganization in August 2018 that had been driven by Renewable Fuel Standard compliance costs.

The case advanced as an integrated plan-and-sale process: the First Day Declaration of CRO Jeffrey S. Stein framed insurer non-payment under the company's $1.25 billion property and business interruption program as "the heart of the need" for the filing, and the debtors entered the case with a $100 million debtor-in-possession facility, an existing intermediation facility in default, and approximately $1.75 billion of funded debt. Hon. Kevin Gross confirmed the Fourth Amended Plan on February 13, 2020, the asset sale to Hilco Redevelopment Partners closed on June 26, 2020, and the Liquidating Trust later recovered over $200 million through a January 2022 business interruption insurance settlement.

Debtor(s)	PES Holdings, LLC (8 jointly administered entities)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	19-11626
Petition Date	July 21, 2019
Confirmation Date	February 13, 2020
Effective Date	June 26, 2020
Judge	Hon. Kevin Gross
Claims Agent	Omni Management Group, Inc.
DIP Facility	Up to $100 million senior secured delayed-draw term loan, with $20 million incremental option, from existing term loan lenders; Cortland Capital Market Services LLC as agent
Plan Type	Fourth Amended Joint Chapter 11 Plan (Asset Sale Restructuring)

Girard Point Explosion and Liquidity Crisis

The proximate cause of the 2019 filing was a fire and series of explosions at the Girard Point refinery alkylation unit on June 21, 2019. The U.S. Chemical Safety and Hazard Investigation Board attributed the incident to a ruptured pipe elbow that released hydrocarbons into the alkylation unit, igniting and producing the largest off-site debris field in the agency's investigative history. The Girard Point refinery was rendered largely inoperable, and the debtors announced in November 2019 that they would cease all refining operations and market the 1,300-acre site for sale.

The Stein declaration described the immediate financial consequence in concrete terms. The debtors held $1.25 billion in aggregate insurance coverage under a program of more than 30 policies for property damage and business interruption losses, but as of the petition date the insurers had not yet made advance payments. Stein estimated that the fixed costs of maintaining the complex against severely reduced throughput would consume more than $100 million of liquidity within weeks, and identified the gap between the unrealized insurance recovery and the immediate cash burn as the central reason for the filing.

The Girard Point Incident compounded a separate prepetition trigger. ICBC Standard Bank PLC, the debtors' intermediation facility provider under the Supply and Offtake Agreement (SOA), declared an Event of Default and designated an Early Termination Date on July 19, 2019, two days before the petition. The intermediation facility — under which ICBCS and Merrill Lynch Commodities owned the crude inputs and refined product inventories on the debtors' tanks — supported approximately $950 million of working capital exposure. Termination of the SOA, combined with the loss of refining throughput, eliminated the principal source of operating cash flow.

The debtors had previously emerged from chapter 11 just 11 months earlier. Their January 2018 prepackaged filing addressed approximately $600 million of funded debt and obtained $260 million of new capital commitments based on management's view that high RIN compliance costs under the Renewable Fuel Standard had become a structural drag on East Coast refining economics. The 2019 filing therefore proceeded against a backdrop of recently restructured capital and an industry stress narrative the company had already litigated in chapter 11 once before.

Capital Structure and the ICBCS Intermediation Facility

As of the July 21, 2019 petition date, the debtors' total funded debt was approximately $1.75 billion. The structure consisted of a four-tranche term loan, two seller-financed obligations, and the intermediation facility:

The term loan tranches were administered by Cortland Capital Market Services LLC and bore interest at Eurodollar or ABR rates plus an applicable margin. Sunoco Logistics Partners Operations L.P. held the SXL Promissory Note, an obligation tied to the original 2012 acquisition of the refining complex from Sunoco Inc. NGL Energy Partners, LP held the installment sale obligation against PESRM relating to propane storage assets.

The intermediation facility with Merrill Lynch Commodities, Inc. and ICBC Standard Bank PLC was structurally distinct from the term loans. Under the SOA, MLC and ICBCS owned the in-tank inventories of crude oil, intermediate products, and refined products and sold them to PESRM as needed. The intermediation providers held first-priority liens on a defined pool of "SOA Priority Collateral," with the term loan lenders' liens on the balance of the estate. That intercreditor architecture became the focus of the case's first major dispute when the debtors sought DIP financing on a priming basis.

DIP Financing and the ICBCS Priming Dispute

The debtors filed a debtor-in-possession financing motion on the first day of the case seeking authority to enter a senior secured delayed-draw term loan of up to $100 million, with an option for $20 million of incremental loans, from existing term loan lenders or their affiliates. Cortland Capital Market Services LLC served as DIP administrative and collateral agent. The facility carried an initial maturity of April 30, 2020 and was secured by priming liens on prepetition collateral subject to intercreditor protections. Use of proceeds was directed to health, safety, and environmental obligations at the damaged refinery, administrative costs, the marketing and sale process, payment of certain critical suppliers, and pursuit of insurance claims related to the Girard Point Incident.

ICBCS filed an immediate objection to the DIP motion, arguing that the proposed facility improperly primed ICBCS's interest in SOA Priority Collateral without providing adequate protection, that the SOA prohibited the granting of priming liens on SOA Priority Collateral, and that the $100 million facility was larger than necessary to bridge the case. The dispute was resolved through the negotiated Final DIP Order, which included replacement security interests in SOA Priority Collateral, an allowed superpriority administrative expense claim under section 507(b), and reimbursement of professional fees in favor of the SOA Secured Parties. The court entered the Interim DIP and Cash Collateral Order on July 23, 2019.

The DIP draw was paced against the marketing process. The debtors received Bloomberg Law-reported authorization in mid-November 2019 to draw the final $35 million of the $100 million commitment as the bidding procedures process advanced toward the auction. In October 2019, Judge Gross also approved a contested motion authorizing the debtors to award confidential retention bonuses to executives during the sale process, with the recipients and amounts kept under seal over objection.

The intercreditor priority issue between Cortland (term loan agent) and ICBCS resurfaced after confirmation in litigation over insurance recoveries. The District of Delaware later ruled, in an appeal of a $1.3 billion bankruptcy court order addressed by the memorandum opinion in 1:20-cv-00363, that the Intercreditor Agreement unambiguously granted ICBC Standard Bank PLC the first-priority interest in business interruption insurance proceeds. The ruling shaped the eventual allocation of the BI insurance settlement to ICBCS, the term loan lenders, and the unsecured creditor pool.

Marketing, Auction, and Selection of Hilco Redevelopment Partners

The debtors retained PJT Partners LP as investment banker and ran a marketing process beginning in the summer of 2019. The solicitation drew interest from approximately 15 prospective bidders in early rounds. The court entered the Bidding Procedures Order on November 14, 2019 setting a January 10, 2020 bid deadline, and the debtors filed the underlying bidding procedures and sale motion earlier that fall.

The auction took place on January 17, 2020. Two qualified bidders participated: HRP Philadelphia Holdings, LLC, a Hilco Redevelopment Partners-controlled entity, and Industrial Realty Group, LLC (IRG). The two bids reflected fundamentally different post-closing visions for the site. HRP proposed redevelopment of the 1,300-acre complex into a mixed-use industrial campus and told a Philadelphia City Council member shortly after the auction that the Hilco project could ultimately bring approximately 10,000 jobs to the site. IRG proposed restarting refining operations.

The auction proceeded through multiple rounds and ended in a blind round in which HRP submitted an offer of $240 million. IRG offered only a $5 million premium above HRP's initial position, which the debtors and the Restructuring Committee did not treat as competitive given execution risk on the IRG restart proposal. The debtors designated HRP as the Successful Bidder, with a Purchase and Sale Agreement dated January 17, 2020. The transaction structure transferred substantially all of the operating assets to HRP, while excluded assets — principally the pending insurance claims and litigation causes of action — were earmarked for transfer to a Liquidating Trust on the Effective Date.

Plan Confirmation, Sale Amendment, and Creditor Objections

The debtors filed an original chapter 11 plan in October 2019 and a First Amended Plan in December 2019, with the Disclosure Statement approved on December 11, 2019. After three further amendments to track the auction outcome and the amended Purchase and Sale Agreement, the Fourth Amended Joint Chapter 11 Plan was filed on February 13, 2020, the same day Judge Gross entered the Confirmation Order. The plan implemented an "Asset Sale Restructuring": HRP would acquire the operating assets, and a Liquidating Trust would administer remaining assets, including insurance recoveries and litigation claims, for the benefit of impaired creditors.

Class treatment under the confirmed plan tied recoveries to the GUC Waterfall and the Liquidating Trust distribution mechanics:

The Official Committee of Unsecured Creditors filed an objection to confirmation arguing that the debtors should not have selected HRP over IRG. The committee asserted that the IRG bid offered superior potential recoveries to general unsecured creditors through a refinery restart scenario and that the Plan unfairly subordinated unsecured interests to the term loan lenders' redevelopment-driven valuation. The Term Loan Lenders argued in reply that the IRG bid was contingent on regulatory approvals and capital commitments that IRG had not made, and that the auction record supported the HRP designation. Judge Gross confirmed the plan over the committee's objection.

A second contested matter emerged after confirmation. HRP sought a $27.5 million reduction in the purchase price, citing the COVID-19 pandemic, increased environmental remediation costs, and expenses arising from a post-confirmation bulkhead breach at the site. Marble Ridge Capital LP and Serengeti Asset Management LP, both holders of Term Loan Claims, filed an objection to the amendment, alleging that HRP had intentionally delayed the filing of a Pennsylvania Department of Environmental Protection soil management plan by 58 days to manufacture grounds for a price reduction, and that HRP's COVID-19 justification was contractually invalid given the Purchase Agreement's express exclusion of economic conditions from the definition of a Material Adverse Effect. The court approved the Amendment Order on June 25, 2020, requiring HRP to cover the debtors' cost of carry at $357,143 per day from June 1, 2020 through closing. The auction-determined post-bidding price had been $252 million; following the amendment, the final cash purchase price was approximately $224.5 million. The plan went effective on June 26, 2020, the same day the sale closed. NGL Energy Partners later filed a motion to compel payment of its $26.7 million Other Secured Claim from the HRP sale proceeds rather than from the Liquidating Trust waterfall, opening a separate dispute over allocation of the proceeds.

$1.25 Billion Insurance Litigation and BI Settlement

The insurance litigation became the largest post-confirmation contest in the case. The debtors and, after the Effective Date, the Liquidating Trust pursued recoveries under the property and business interruption coverage program in adversary proceeding 20-50454, PES Holdings, LLC v. Allianz Global Risks U.S. Insurance Co., filed against more than thirty insurers after the company sued for the $1.25 billion payout in February 2020.

In December 2021, the bankruptcy court ruled in favor of PES on cross-motions for summary judgment, holding that policy losses must be valued under the Stipulated Loss Value provision and that the term "physical depreciation" did not include labor depreciation. Coverage reporting at the time put the additional coverage exposure secured by the ruling at $93 million, with the order allowing PES to pursue claims for up to $250 million in policy limits. Policyholder counsel later characterized the decision as a meaningful win for replacement-value coverage interpretation in business interruption disputes.

The BI claim itself was the subject of a valuation dispute. The Liquidating Trust calculated an unpaid BI claim value of approximately $460.9 million, while the Settling Insurers argued the value was negative $503.2 million — a roughly $1 billion gap. ICBCS asserted a separate BI claim as an additional insured under the policies, and approximately $100 million of the debtors' calculated BI claim overlapped with the ICBCS claim. Following mediation by former U.S. District Judge Layn Phillips, the parties reached a settlement in late 2021. The Liquidating Trust filed the Rule 9019 motion on November 16, 2021, and the court entered the order approving the settlement on January 18, 2022. The settlement delivered over $200 million in distributable value to the estates. Property damage claims were excluded and remained subject to ongoing litigation.

EPA Settlements and Environmental Resolution

The estate negotiated two principal environmental settlements with the federal government during and after the case. The first was a Renewable Fuel Standard (RFS) compliance settlement. The EPA RFS settlement page reflects the resolution of the debtors' RIN obligations through a consent decree filed in May 2020, addressing a compliance dispute that had been a stated driver of the company's prior 2018 chapter 11. The second was a settlement capping the federal government's environmental claims against the estate; in June 2020, Judge Gross approved a deal capping EPA claims at $10 million, resolving claims previously asserted at $35 million.

Years later, in October 2024, the EPA reached a separate $4.2 million settlement with the Liquidating Trust over violations stemming from the 2019 explosion, characterized at the time as the agency's largest settlement to date for a single refinery incident. Site remediation has continued under the buyer; under the Bellwether District redevelopment, the current site owner is not liable for pre-existing EPA fines tied to the 2019 fire, which remain the responsibility of the Liquidating Trust under the confirmed plan and the Sale Order. The Pennsylvania DEP soil management plan obligations that featured in the Marble Ridge objection have proceeded under amended consent order arrangements documented in post-confirmation environmental filings.

The Liquidating Trust and the GUC Claims Administrator remain active. As of February 2026, the bankruptcy court had granted the trust's 16th extension of the claims objection deadline and 25th extension of the removal deadline, with the current claims objection bar date extended through August 3, 2026. The IRS holds an open $80.8 million protective priority claim, and the trust continues to administer environmental, tax, and residual insurance claims through the GUC Waterfall mechanics established at confirmation. The Omnibus Final Fee Order entered September 14, 2020 capped the case-administration fee process; through the Q2 2021 post-confirmation report, Kirkland & Ellis LLP recorded approximately $59.6 million in cumulative fees and expenses as lead debtor counsel, with Pachulski Stang Ziehl & Jones (debtor co-counsel and committee counsel) at $23.2 million, PJT Partners at $7.6 million, Conway MacKenzie at $5.8 million, and Omni Management Group at $2.4 million as claims agent.

Key Timeline

The case ended with the permanent closure of the refinery and sale to Hilco; the milestones below span the 2018 prepackaged filing through the Liquidating Trust's post-confirmation administration.

Frequently Asked Questions

Who is the claims agent for PES Holdings?

Omni Management Group, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Who bought the PES refinery?

HRP Philadelphia Holdings, LLC, an entity controlled by Hilco Redevelopment Partners, was selected as the Successful Bidder at the January 17, 2020 auction with a $240 million bid that was later raised to $252 million through subsequent rounds. Following a post-confirmation purchase price amendment approved on June 25, 2020, the final cash purchase price closed at approximately $224.5 million on June 26, 2020, the Plan Effective Date.

How much insurance did PES recover?

The Liquidating Trust recovered over $200 million in distributable value through a January 2022 business interruption insurance settlement approved by the bankruptcy court. The settlement followed mediation by former U.S. District Judge Layn Phillips and resolved a dispute in which the parties' BI valuations differed by nearly $1 billion. Property damage claims were excluded from the settlement and remained subject to ongoing litigation.

What happened to PES's prior 2018 chapter 11?

PES Holdings filed an earlier prepackaged chapter 11 in January 2018 driven by RIN compliance costs under the Renewable Fuel Standard. That case was confirmed in March 2018, and the company emerged on August 7, 2018 with $260 million of new capital commitments. The 2019 chapter 11 was a separate filing precipitated by the Girard Point explosion 11 months after emergence.

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